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Asian Drivers

Asian foreign direct investment in Africa: towards a new era of cooperation among developing countries

How to increase Asian FDI to Africa: case studies from Botswana, Ghana, Madagascar, Mozambique and Tanzania

Authors: M. Fujita; G. Liang; P. Mallampally; A. Miroux
Publisher: United Nations [UN] Conference on Trade and Development , 2007

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How might African countries attract a greater proportion of Asian foreign direct investment (FDI)? This book first looks for answers to this question through an examination of the role that FDI played in both the successful economic development strategies of East Asia, and in the Asian financial crisis. It then considers the implications of these experiences to identify the policies and institutions needed to increase Asian FDI in five countries of Africa: Botswana Ghana Madagascar, Mozambique and Tanzania. Specific attention is given to the potential for FDI from small and medium-sized enterprises (SMEs).

The report offers specific policy recommendations for each of the five countries examined, as well as noting more general findings of use to other African countries. These include:

  • rapid economic growth in Asia can be expected to lead to increased Asian investments in Africa, in natural resources and manufacturing as well as services
  • investment promotion agencies in Africa need to develop greater expertise and flexibility, rather than a sector-neutral and passive policy stance
  • experiences of Chinese FDI in Africa point to the importance of finding a suitable African partner, host government support, local market-oriented activity and technology transfer
  • problems faced by Chinese enterprises operating in Africa are partly due to the economic environment of the host countries, a shortage of skilled workers, restrictions on foreign exchange, and inadequate or inappropriate incentives offered
  • other developing countries, including those in Africa, may be able to draw lessons from China’s success in attracting and effectively using FDI inflows over the past two decades
  • most African FDI promotion measures tend to target large transnational corporations (TNCs), thus missing out on the various strengths and advantages that SMEs may be able to offer to African developing countries.

This publication is based on papers prepared for the project, ‘Needs Assessment to Attract Asian FDI into Africa’.